Forward-Looking Statements
The following plan of operation provides information which management believes
is relevant to an assessment and understanding of our results of operations and
financial condition. The discussion should be read along with our financial
statements and notes thereto. This section includes a number of forward-looking
statements that reflect our current views with respect to future events and
financial performance. Certain statements that the Company may make from time to
time, including all statements contained in this report that are not statements
of historical fact, constitute "forward-looking statements". Forward-looking
statements may be identified by words such as "plans," "expects," "believes,"
"anticipates," "estimates," "projects," "will," "should," and other words of
similar meaning used in conjunction with, among other things, discussions of
future operations, financial performance, product development and new product
launches, market position and expenditures. You should not place undue certainty
on these forward-looking statements. These forward-looking statements are
subject to certain risks and uncertainties that could cause actual results to
differ materially from our predictions.
The following Management's Discussion and Analysis of Financial Condition and
Results of Operations ("MD&A") is intended to help you understand our historical
results of operations during the periods presented and our financial condition
for the three and six months ended December 31, 2022 and 2021. This MD&A should
be read in conjunction with our audited financial statements as of June 30, 2022
and 2021.
Overview
We are engaged in pursuing pre-clinical and drug development activities for
certain pharmaceutical formulations that include cannabinoids. We have filed
three provisional patent applications, and acquired a license covering certain
intellectual property related to a drug delivery system.
As a relatively new business engaged in start-up operations and activities, we
will require substantial additional funding to successfully complete any of our
drug development programs. At present, we cannot estimate the substantial
capital requirements needed to secure regulatory approvals for our drug
candidates. We estimate that we will need to raise at a minimum $50,000 just to
maintain our existence as a public company for the remainder of the current
year.
We are a start-up company with no revenues from operations. Notwithstanding our
successful raise of $2,076,158, net of offering costs, in equity capital and the
receipt of $146,750, net of financing costs, from a debt issuance during the
period from inception to December 31, 2022, there is substantial doubt that we
can continue as an on-going business for the next twelve months without a
significant infusion of capital or entering into a business combination
transaction. We do not anticipate that Nexien BioPharma will generate revenues
from its research and development activities related to its drug development
projects in the near future, due to the protracted revenue model of pursuing
pharmaceutical drug development in accordance with the pathway set forth by the
FDA. The Company had to cease research and development activities due to the
lack of sufficient working capital. The Company received a funding commitment
from a third-party lender during the year ended June 30, 2022 and is evaluating
the recommencing of research and development activities on its myotonic
dystrophy project. While management continues its efforts to raise additional
capital for the Company, it is also seeking merger or other business combination
or restructuring opportunities.
Results of Operations for the three months ended December 31, 2022 as compared
to December 31, 2021
Net loss for the three months ended December 31, 2022 was $93,592, a decrease in
loss of $126,602 from the net loss of $220,194 reported for the three months
ended December 31, 2021.
General and administrative costs of $66,872 for the three months ended December
31, 2022 includes $50,750 as the value of non-cash stock-based compensation
costs for common shares issued to the Company's officers. In comparison, general
and administrative costs of $202,056 incurred for the three months ended
December 31, 2021 includes non-cash charges of $163,255 for the fair value of
the shares issued for the acquisition of CRX Bio Holdings LLC and $35,500 as the
value of non-cash stock-based compensation costs for common shares issued to
officers.
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General and administrative expenses, exclusive of non-cash compensation costs,
were consistent during the 2022 and 2021 periods, and consisted predominately of
costs and expenses associated with the Company's maintaining its public company
status.
During the three months ended December 31, 2022 and 2021, the Company incurred
$18,138 and $5,402, respectively, for amortization of discount related to the
convertible debt financings. Interest expense, all related to convertible debt
financings, for the 2022 and 2021 periods was $2,422 and $1,296, respectively.
The increase in interest expense for 2022 is attributable to the convertible
debt financing of January 2022.
There were no research and development costs for the periods ended December 31,
2022 and 2021 due to the Company's limited financial resources and availability
of research personnel.
Professional fees of $6,160 for the three months ended December 31, 2022
decreased by $5,280 from $11,440 for the period ended December 31, 2021. Fees
for the 2022 and 2021 periods consisted of legal fees for securities related
matters and fees for auditor quarterly review and other required tax and
regulatory Fees for the 2021 period included partial fee incurrence for the 2021
fiscal year annual audit as the audit was completed in October 2021, whereas the
2022 audit was completed in September 2022.
During the three months ended December 31, 2022, the Company issued 250,000
shares of common stock to each of three officers for services rendered to the
Company.
Results of Operations for the six months ended December 31, 2022 as compared to
December 31, 2021
Net loss for the six months ended December 31, 2022 was $188,466, a decrease in
loss of $153,439 from the net loss of $341,905 reported for the six months ended
December 31, 2021.
General and administrative costs of $125,927 for the six months ended December
31, 2022 includes $101,500 as the value of non-cash stock-based compensation
costs for common shares issued to the Company's officers. In comparison, general
and administrative costs of $310,955 incurred for the six months ended December
31, 2021 includes non-cash charges of $223,255 for the fair value of the shares
issued for the acquisition of CRX Bio Holdings LLC and $70,000 as the value of
non-cash stock-based compensation costs for common shares issued to officers.
General and administrative expenses, exclusive of non-cash compensation costs,
were consistent during the 2022 and 2021 periods, and consisted predominately of
costs and expenses associated with the Company's maintaining its public company
status.
During the six months ended December 31, 2022 and 2021, the Company incurred
$36,276 and $10,863, respectively, for amortization of discount related to the
convertible debt financings. Interest expense, all related to convertible debt
financings, for the 2022 and 2021 periods was $4,843 and $2,607, respectively.
The increase in interest expense for 2022 is attributable to the convertible
debt financing of January 2022.
There were no research and development costs for the periods ended December 31,
2022 and 2021 due to the Company's limited financial resources and availability
of research personnel.
Professional fees of $21,420 for the six months ended December 31, 2022
increased by $3,940 from $17,480 for the period ended December 31, 2021. Fees
for the 2022 and 2021 periods consisted of legal fees for securities related
matters and fees for auditor annual audit and quarterly review and other
required tax and regulatory filings.
During the six months ended December 31, 2022, the Company issued 500,000 shares
of common stock to each of three officers for services rendered to the Company.
Liquidity and Capital Resources
At December 31, 2022, we had a working capital deficit of $202,321 and cash of
$68,991, as compared to a working capital deficit of $117,605 and cash of
$116,898 at June 30, 2022. The decrease in both working capital and cash was due
primarily to the utilization of existing cash for operating activities during
the six months ended December 31, 2022. Substantially all available funds were
being utilized solely for maintaining corporate operations as a public company.
We used $47,907 of cash for operating activities during the six months ended
December 31, 2022.
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While management of the Company believes that the Company will be successful in
its current and planned activities, there can be no assurance that the Company
will be successful in its drug development activities, and raise sufficient
equity, debt capital or strategic relationships to sustain the operations of the
Company.
Our ability to create sufficient working capital to sustain us over the next
twelve-month period, and beyond, is dependent on our raising additional equity
or debt capital, or entering into strategic arrangements with one or more third
parties.
There can be no assurance that sufficient capital will be available to us. We
currently have no agreements, arrangements or understandings with any person to
obtain funds through bank loans, lines of credit or any other sources.
Availability of Additional Capital
Notwithstanding our success in raising gross proceeds of $2.1 million from the
private sale of equity securities through December 31, 2022, and the completion
of a debt financing agreement resulting in the receipt of $146,750 in January
2022, there can be no assurance that we will continue to be successful in
raising additional funds through equity capital and/or debt financings and have
adequate capital resources to fund our operations or that any additional funds
will be available to us on favorable terms or in amounts required by us. We
estimate that we will require at a minimum $50,000 just to maintain our
existence as a public company for the remainder of the current year.
Any additional equity financing may be dilutive to our stockholders, new equity
securities may have rights, preferences or privileges senior to those of
existing holders of our shares of Common Stock. Debt or equity financing may
subject us to restrictive covenants and significant interest costs.
Capital Expenditure Plan During the Next Twelve Months
To date, we raised approximately $2.1 million, in equity capital (including
exercised warrants) and $146,750 in debt financings, and we may be expected to
require a minimum of $50,000 in capital during the remainder of the year to
continue our existence as a public company. There can be no assurance that we
will continue to be successful in raising capital in sufficient amounts and/or
at terms and conditions satisfactory to the Company. Our revenues are expected
to come from our drug development projects. As a result, we will continue to
incur operating losses unless and until we have obtained regulatory approval
with respect to one of our drug development projects and commence to generate
sufficient cash flow to meet our operating expenses. There can be no assurance
that we will obtain regulatory approval and the market will adopt our future
drugs. In the event that we are not able to successfully: (i) raise equity
capital and/or debt financing; or (ii) market our drugs after obtaining
regulatory approval, our financial condition and results of operations will be
materially and adversely affected.
Going Concern Consideration
Our registered independent auditors have issued an opinion on our financial
statements as of June 30, 2022 which includes a statement describing our going
concern status. This means that there is substantial doubt that we can continue
as an on-going business for the next twelve months unless we obtain additional
capital to pay our bills and meet our other financial obligations. This is
because we have not generated any revenues and no revenues are anticipated until
we begin marketing any drugs that we successfully develop. Accordingly, we must
raise capital from sources other than the actual sale from any drugs that we
develop. We must raise capital to continue our drug development activities and
stay in business.
Off-Balance Sheet Arrangements
At December 31, 2022 and June 30, 2022, we did not have any off-balance sheet
arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated
under the Securities Act of 1934.
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Contractual Obligations and Commitments
On February 28, 2018, we obtained a worldwide exclusive license with respect to
a proprietary delivery system for cannabinoid-based medications. Upon execution
of the agreement, as amended September 18, 2018, $35,000 was paid to the
licensor. An additional $10,000 was paid on November 1, 2018, $20,000 was paid
on February 28, 2019 and a final payment, in cash or stock at the option of the
Company, of $35,000, due August 31, 2019, was paid in shares of our common
stock. We are required to pay milestone payments upon obtaining regulatory
approval of pharmaceutical licensed products and royalties based upon sales of
licensed products. We may grant sublicenses under the terms of the agreement.
Critical Accounting Policies
Our significant accounting policies are described in the notes to our financial
statements as of December 31, 2022 and are included elsewhere in this report.
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NEXIEN BIOPHARMA, INC. 
